Sales Tax > Glossary > Click-through Nexus
Click-through Nexus refers to a tax concept in the United States where a business establishes a sales tax obligation in a state due to referrals or links from affiliates or third-party websites, resulting in sales generated through those connections, thereby requiring the business to collect and remit sales tax in that state.
Click-through nexus refers to a tax connection established when an out-of-state seller generates sales through referrals from in-state affiliates. This concept emerged as states sought to capture sales tax revenue from online transactions, particularly after the Supreme Court’s decision in South Dakota v. Wayfair, Inc. Understanding click-through nexus is crucial for businesses operating online, as it can significantly impact their sales tax obligations and compliance strategies.
The legal framework for click-through nexus varies by state but generally involves laws that require remote sellers to collect sales tax if they have agreements with in-state affiliates who refer customers. States like California and New York have enacted specific legislation outlining these requirements. Businesses must stay informed about the evolving legal landscape to ensure compliance and avoid potential penalties.
Click-through nexus can create significant sales tax obligations for businesses that may not have previously collected taxes in certain states. When a business has click-through arrangements with local affiliates, it may be required to register for a sales tax permit and collect taxes on applicable transactions. This obligation emphasizes the importance of understanding where your business has economic ties and how those ties influence your overall tax responsibilities.
To identify click-through nexus within your business operations, consider the following steps:
To ensure compliance with click-through nexus regulations, businesses should adopt best practices such as maintaining accurate records of affiliate relationships, regularly reviewing state-specific laws, implementing robust accounting systems for tracking sales data, and consulting with tax professionals when necessary. Staying proactive about compliance will help mitigate risks associated with potential audits or penalties related to uncollected sales taxes.
These guides are a reference point only and may need additional context for your specific application to be compliant. Contact a registered tax professional in your area for accurate information that applies to your specific situation.
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